As the world marked the 10th anniversary of the fall of Lehman Brothers last weekend, an event which had pushed the global financial system to the verge of collapse, the discussion in the Indian context has shifted to the ongoing non-performing assets (NPA) crisis in the banking system. Indian banks, particularly public sector banks (PSBs), have accumulated a pile of bad debts and are struggling to extend credit. Reserve Bank of India (RBI) is forcing banks to take large defaulters to the bankruptcy court and the government in the process of infusing capital into PSBs. The results of RBI’s different schemes to enable recovery before the IBC were uninspiring. There have been litigations in a number of cases that have not allowed the resolution of stressed assets in a time-bound manner. PSBs require deeper reforms, both on the governance and operational level, to be able to avoid a repeat of what has happened in the last few years. However, the immediate thing to watch is how the resolution of stressed assets progresses.

(Live Mint)